Lost Money In Online Scam? RBI Says You Could Get Up to Rs 25,000 Back Soon

RBI's New Digital Fraud Rules From January 2027: For years, cyber fraudsters thrived on one simple assumption: most victims would never get their money back.

A fake KYC update. A phishing link. A malicious app. One wrong click and the money was gone. The victim would panic. The bank would investigate. Weeks would pass. In many cases, the trail would go cold.

Now, India's banking regulator wants to change that equation.

The Reserve Bank of India (RBI) has unveiled a new framework that could provide compensation of up to Rs 25,000 to victims of digital payment frauds, while also tightening the systems banks use to detect and manage risks. The rules are scheduled to come into force from January 1, 2027.

The RBI has created a clear pathway for customers to seek compensation when they fall victim to unauthorised digital transactions. Under the framework, customers who report fraud within five days of noticing it can claim compensation of up to Rs 25,000, subject to conditions and investigation findings.

In simple terms, the regulator is trying to ensure that victims are not left alone after a scam. The move comes at a time when digital payment frauds are rising alongside the rapid growth of UPI, internet banking and mobile transactions.

But compensation is only one part of the story.

Internal Risk Management

The RBI is simultaneously pushing banks to strengthen their internal risk management systems. Earlier this week, the central bank released draft guidelines on model risk management, covering artificial intelligence, machine learning models and automated decision-making systems used by financial institutions.

The connection between the two initiatives is important.

Banks increasingly rely on AI systems to identify suspicious transactions, detect fraud patterns and monitor customer activity in real time. Better governance of these models could improve the industry's ability to spot fraudulent behaviour before customers lose money.

Ajay Sirikonda, Partner and Leader - Financial Services Risk Management at EY India, said the RBI's draft guidance gives banks a much-needed framework for managing AI-related risks.

"The RBI's draft guidance is a welcome step that finally gives Indian banks a clear playbook for model and AI risk. In some ways it goes further than the UK's PRA or the US regulators -- it brings AI, third-party models and consumer protection into one frame," he said.

How RBI Framework Helps Banks

Fraud detection systems are becoming increasingly sophisticated. But banks have often struggled with questions around accountability, explainability and governance of AI models. The RBI's framework seeks to address those gaps.

According to Sirikonda, the guidance may actually accelerate the adoption of AI across the banking sector.

"The guidance does add governance and explainability friction -- but mostly where the stakes are highest. Elsewhere, it removes the bigger blocker: uncertainty. Banks have sat on AI not just because it was costly, but also because no one had said what was allowed. This guideline says it. For most use cases, that is an accelerant, not a constraint," he said.

For consumers, however, the immediate takeaway is much simpler. If you become a victim of digital payment fraud, speed matters.

Customers must report unauthorised transactions as quickly as possible. Those who alert their bank within the prescribed window stand a significantly better chance of receiving compensation under the RBI's framework.

The faster victims report incidents, the greater the likelihood of recovery. The stronger the AI systems banks deploy, the harder it becomes to move stolen money unnoticed through the financial system.